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Saturday, September 24, 2016

MF’s Money Mystery Is How Much It Paid Moody’s

Feb. 3 (Bloomberg) — So many times when the big credit- rating companies have embarrassed themselves, the world has sighed and chalked it up to a business model that by design invites corruption and incompetence. Perhaps never before have the public’s expectations for the industry been lower.

The fundamental flaw is that the major rating companies, led by Moody’s Investors Service and Standard & Poor’s, typically are paid by the issuers of the securities they rate, or by other deeply interested parties, such as Wall Street underwriters. Too often the raters seem to be the last to know that a company they dubbed investment grade was going broke, or that a mortgage bond once deemed AAA was about to default. The public sees these things and naturally draws a link between what the raters say and how they are compensated.

  • Dave DiDo

    Mr. Weil’s suggestion to make rating services like Moody’s and S&P disclose their fees is a good suggestion. I’m a self-employed, independent insurance agent who represents many different companies.As a professional I’m supposed to perform due diligence and know the financial condition of the companies I represent. Sometimes my customers want to know the rating of the company I am proposing for them.As things now stand the variuos ratings, in my opinion, are meaningless.A reform like Mr. Weil’s would help. And wouldn’t it be nice if the many candidates for public office would discuss specific ways,like this one, to improve our country? Instead they resort to generalities, name-calling, and personal attacks. We as an electorate must demand more from our candidates. The Citizens United decision hurts our ability to impact the discourse.